“Megapolitans” and Supply Chain Efficiency To Drive U.S. Industrial Market

Florida regions forecasted to be among the strongest performing industrial markets nationwide

Miami, FL and Los Angeles, CA – August 12, 2014 – The ever-evolving global supply chain is prompting distribution companies that process freight shipments between the U.S. and Asia to optimize their U.S. industrial real estate portfolios to increase efficiencies and cost savings. These companies are heavily scrutinizing transportation costs in East Coast and West Coast seaports—and inland cities with strong transportation links—locating facilities in markets best able to serve established and emerging “megapolitan” areas in a quick, cost-effective manner, according to the latest report from CBRE Group, Inc., Transportation Cost Equivalence Line: East Coast vs. West Coast Ports. Download report here.

“Distribution and fulfillment users need a real estate footprint that allows them to move freight through the U.S. transportation network as fast as economically feasible,” said Scott Marshall, Executive Managing Director, Industrial Services, Americas, CBRE. “Future location decisions will largely be driven based on population growth—the East Coast and West Coast ports with the infrastructure and transportation links to serve the largest and fastest growing regions in the country will also be home to strong-performing industrial real estate markets.”

“Significant and ongoing investment in Florida’s seaports, airports and intermodal transportation infrastructure is driving industrial development throughout the state and attracting investors and businesses to the region,” said South Florida Managing Director Ken Krasnow.

Between 2005 and 2040, the U.S. population is expected to grow by 100 million people—60 million of which are expected to reside within 20 markets characterized as megapolitans. These megapolitan markets comprise cities and counties linked by shared transportation networks, labor markets and/or water supplies. These 20 megapolitan areas, which can be further combined into 10 clusters, are projected to house about two-thirds of the U.S. population by 2040 and will capture the lion’s share of total investment dollars spent on development and growth. According to projections by the Florida Bureau of Economic and Business Research, North Florida’s population is expected to increase by 1.2 million people, or 31%, between 2013 and 2040, while Central Florida’s population is expected to increase by 2.7 million people, or 39%, and South Florida’s population is expected to increase by 2.4 million people, or 29%.

The impact of population shifts on supply chain networks and industrial real estate in the coming years will be significant. However, the additional volume moving through these megapolitan regions could result in increased congestion and loss of productivity. As such, the continued investment in transportation infrastructure is crucial.

In order to capitalize on the greater container volume that will soon traverse the expanded Panama Canal, many seaports have recently invested millions in infrastructure, creating alternative transportation solutions including short haul rail and barge systems to accommodate post-Panamax ships. However, the expansion of the Panama Canal is not expected to have a major impact in the movement of freight within the U.S., as separate strategies are required for high-value, time-sensitive freight (quicker delivery) and for low-value, low-cost freight (cost effective delivery).